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Closing Bell

News/Business. Maria Bartiromo, Bill Griffeth. A guide through the most important hour of the Wall Street trading day. New. (CC) (Stereo)

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01:00:00

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San Francisco, CA, USA

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Virtual Ch. 58 (CNBC)

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mpeg2video

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ac3

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704

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480

TOPIC FREQUENCY

U.s. 19, S&p 17, Us 12, Ron 8, Ackman 8, Ontrack 7, Apple 5, Davos 4, Exxon 4, Christine Lagarde 4, Mandy 4, Icahn 4, Exxon Mobil 3, Washington 3, United States 3, Cisco 2, Herbalife 2, Steve Cortez 2, Jonathan 2, Shanghai 2,
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  CNBC    Closing Bell    News/Business. Maria Bartiromo, Bill Griffeth. A guide  
   through the most important hour of the Wall Street trading day....  

    January 25, 2013
    3:00 - 4:00pm EST  

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he wants to go back after bill for using his name but why is he wading into this mess? >> i think robert frank had it right. there is a real personal -- >> the ego trumps the money. >> baggage here. these guys really strongly dislike each other. remember watching obama and romney on the campaign trail and in the debates? these guys really couldn't stand each other. that was the palpable feeling at times. i think we heard that over the phone today. the rhetoric speaks for itself. >> mandy just pulled an irish exit. puff of smoke. boom. she is hosting closing bell. let's finalize it with this. what is the next step? is it over between these guys? what is going to happen here? >> i think they've had their say for today. i wouldn't be surprised if some sort of words resurface weeks from now. i think the herbalife saga will go on. ackman will certainly continue to make his feelings public and eiicahn can't resist a jab. >> he was talking about herbalife being short, difficult to borrow. i got an e-mail from a prominent
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hedge fund manager. he said it is wrong. it is easy to borrow herbalife shares right now and the cost to carry is not that bad. so was icahn wrong on the short? one hedge fund manager says perhaps he was. >> meaning ackman wrong? >> no. icahn was wrong on the short talking about how to short the stock and whether it is too difficult. this guy says i could find it right now. great job. >> thank you. >> thank you very much. have a great weekend. thanks for watching "street signs." "closing bell" with bill and mandy now. >> happy friday everybody. welcome to "closing bell." we'll revisit the ackman icahn brawl we've been talking about in the last few hours. we're also on top of the markets that just won't stop right now. take a look at where we are right now on the dow. and the all-time high from 2007. we get ever closer to that number. we're not that far away at all. >> absolutely right. hello everybody once again. i'm mandy drury of course.
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and we've got more huge interviews including bill gates, right, bill, would he ever return to microsoft as ceo? we'll ask him that. and a whole lot more. >> and you see christine lagarde will join us as well from davos even as the overall markets keep marching toward all-time highs. apple continues to be rotten today. another down day for apple. is this truly a broken stock? we have a bull/bear debate coming up. >> down 12% this week. in the meantime let's look at those markets. you have the dow which is sitting up by about 50 points right now. in fact, it's ontrack for the best january since 1994. the s&p for its part is poised for its longest winning streak in over eight years. also moving to the upside right now and theed nasdaq despite t fact apple has been dragging on thane decks the nasdaq has been defying it and managing to have its best day today in three weeks. >> the s&p 500 flourished with
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the 1500 mark all day today. looking to close above it for the first time in more than five years. meanwhile jim paulson from wells capital management is still looking for the extra reach. a high of 1700 this year. what would be behind that bullish call we asked? >> okay. let's ask him. we've got a lineup of market pros. in today's closing bell exchange jim foalson is joining us once again. larry blazer, and jonathan corpina. quite a lineup. jim, we were just mentioning your name a moment ago. you get to go first. what is behind your call? >> i think the biggest driving force is that the growth rate not only in the united states but around the globe is turning out to be better than expected. we came into this year expecting 2% growth for the united states. i really think we'll end up closer to three. china is coming back to life. europe is calming down. we've got a lot of positive economic momentum. and in addition to that, you got confidence at five-year highs and people are starting to
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settle down and think maybe this is going to be a multiple year recovery so they can increase their valuations on the earnings streams. we're seeing mobiles rise. a lot of good things. starting to see people come back into the equity markets a little bit finally reaching all-time record highs. i think a lot of these forces will take us higher this year. >> okay. i don't know who is directing, liz, dan. if you could show me the 4 box again i'll take a poll of our guests. how many see 1700 on the s&p? raise your hand. anybody? >> by when? >> anybody? glazer is sitting on his hands there. no, larry? you don't see that? >> you know what? i hope jim is right. let me just say. what concerns me is not so much that bullish sentiment as essentially doubled since november. it doesn't concern me as much that the freight train is leesk the station and investors have to jump on or they'll miss it. what concerns me is the sense of entitlement among investors and traders to the fed to support their bull market rally.
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that's great but the entitlement is very dangerous. that is a cop out investment strategy in this market. we need sentiment and fundamentals. we need them in check. curb your enthusiasm here. >> larry, do people really feel that entitlements, when you take a look at the diminishing returns in terms of how much the feds, you know, easy printing money, is actually helping stock markets recently don't you feel that kind of complacency is gone? >> no question, mandy. the fed has been the adult in the room. they've done everything they can to support this market and rally. i would say the fed can't act alone. we need the fundamentals to come along. and right now we may be ahead of those fundamentals. the sentiment is way out in front. that can be very dangerous. in case we're just over our keys too much. >> i think you agree don't you, joe? >> i think i would echo a lot of jim's statements to be quite honest with you. you think about a lot of the drivers of the markets last year and all the uncertainties. sort of the year of the uncertainty premium. you had europe. what's going to happen there. you had of course the election
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here in the u.s. who is going to win that? you had the fiscal cliff. as you kind of peel back through the layers we've got now a lot more clarity and at the end of the day multiples in the equity markets are still quite low. >> and you didn't put your hand up when we asked who also sees 1700 in the market. directionally i agree and i think 1700 certainly is within reach. the question is will it happen in the next 12 months? i'm not sure. earnings growth is clearly tapering off but i think the real key driver and the opportunity for investors in the u.s. equity markets of course is going to be multiple expansion. >> jonathan, there's been a lot of skepticism on the floor of the exchange among you guys as the market went higher. i don't know if you are among the skeptics but here we sit within a stone's throw of some all-time highs for the major averages. where do you see us going here? are we getting ahead of ourselves? >> not just yet. we're moving in a nice, slow pattern. >> okay. >> yes, every day everyone is looking at the markets and we're seeing green on our screen. but i don't think the volatility is in this market and continuing to move our markets. what do i mean by that? we're getting nice, slow steps
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moving this market higher and higher. that's healthy for our markets. i agree with what jim was saying earlier. do i think 1700 is a realistic number? i don't. i think another 100 points over the next 8 to 12 months is something a little more realistic. nothing has derailed on markets so far. we spoke before. europe, elections. economic data. earnings season. we've seen a couple bumps here and there but nothing has hit us back. are we going to see a pullback at some point? yes. 10%, 15%. i don't think so. a couple steps forward. one step back. move that a little higher and higher. >> would it be healthy to have a pull back though? when you think about it we've kind of been trudging high melting up for quite sometime now. maybe it would be a good opportunity for people to get in. >> i think so. that is very healthy for our marx but when you say pull back we need to define pull back. some days on tv with you guys and the market is down a hundred and we're saying is this the correction? is this the pull back? >> right. >> when we see pull back it has to be real steady movement, a flow that is going to continue over a period of time. we might see a couple down days
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here and there that will start a short correction but i don't think we're getting into double digit corrections. >> in our time remaining let's make it meaningful for the individual investors. put your money where your mouth is. what is going to take us to 1700 do you think? >> well, you know, i think that the biggest thing is rising valuations because of rising confidence, bill. >> all right. sector wise i mean. which groups, which stocks are going to take it to 1700? >> i'd be over tilted to merging markets and manufacturing in the united states, industrials and materials. i like the financials again for a second year of out performance. >> what do you think, joe? >> i think, again, i echo some of his comments. looking at emerging markets valuations look attractive and in particular looking at the asian emerging markets. here in the u.s. i continue to favor cyclicals. i think they look much more attra attractive. if i were to pick one sector i'd tell you technology. >> certainly china has been making quite the comeback since the leadership handover went
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quite smoothly. not a hitch there. i think since december we've been really seeing the shanghai make a comeback. this is the year finally that the shanghai market is going to give us some returns? >> i think you will see some returns and broadly speaking when we look at economic growth remember you're making the slow transition from an investment expert driven economy to consumption. so you're probably not going to see double digit growth but i think 8% is in the cards. >> is the u.s. still the best place? >> yes. >> to invest, guys? >> mandy, what is frightening here is that we all agree that some of the best opportunities are overseas. perhaps those markets need to play catch up here. i would also add that commodities have been an area left in the dust. if the fed is very successful, igniting inflation, which may be in the cards in the future commodities would be a place to hedge someone's portfolio as they get out of bonds into equities right now. very quickly we're noting today apple is, let me put it this way. exxon is close to overtaking apple as the most valuable stock in the world. significant at all?
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are you guys watching that at all? >> we are watching it. it is old schools coming back to modern day trading markets that are here. we've all watched apple. we've seen the run in apple. everyone is very familiar with the stock and the products. it just got to prices that were way too lofty for retail investors and when we start getting targets, price targets on it up in the thousand range i think people got a little crazy and scared about it. a lot of profits coming off the table there. this is going to get very cheap very quickly. i think we'll see a move back to the upside again soon. >> jonathan, real quick. you're down on the floor of the stock exchange right? >> yes. >> earlier today on "fast money halftime" scott wapner was the adjudicator of the hedge funders going at each other. you had bill ackman on one side and carl icahn on the other and we could hear lots of cheering or booing or commentary going on on the floor there. what were people saying? >> you were hearing all of that. what was going on is that we have tv screens down here and the buying is always down low but when something comes on the tvs get in sync and volumes come
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higher. everyone was watching and hearing on tv and also seeing the interview happening right in front of us on the cnbc set right down here. >> who were people generally backing did you feel? >> i'm sorry? >> who did you feel generally the traders were backing? >> i think if you're looking at the comments made back and forth and the clarity we were hearing i think ackman was making a pretty good case for himself whether you believe him or not. >> all right. good stuff. that was quite a moment. we were all watching very carefully there earlier today. >> that was great tv. great tv. >> yes it was. it was. >> good job, scott. >> thank you for your thoughts on the markets. >> thank you. >> the stocks remain red hot on wall street. mary thompson puts this rally into historical perspective. >> that's right, mandy. we're seeing levels we haven't seen in quite sometime. let's start first of all for the dow with the dow jones industrial average. the dow and s&p and nasdaq all ontrack for a winning week once again but the dow also ontrack for its 11th gain in the last 12
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sessions and its best january since 1994. so let's take a look at the dow leaders so far this month. familiar names leading the pack here. hewlett-packard which was actually the worst performing dow stock last year. home depot, united technologies, disney, and travelers which just reported some blockbuster earnings. so who are the dow leaders back in january of 1994? this list excludes any of the dow components no longer publicly traded companies. caterpillar was up 17% followed by dupont. united technologies also in the list. let's look at the s&p 500. it's ontrack for its eighth straight gain. a winning streak that we haven't seen since november of 2004. what we couldn't get the s&p 500 numbers that were leading the s&p that year, in november of 2004, these are the ones that have led the s&p rally over the last eight days. netflix of course coming out with a very strong quarterly report up 60%.
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genworth and kla out today with strong numbers as well. the dow looking strong into the close up 49. back to you. >> in fact yes. we are ontrack for the best january for the dow since 1994. a little bit later we'll remind everybody what happened to the markets in 1994. but right now the dow is up 49 points just off the highs of the session. >> okay. is the rally sustainable? harry dent does not think so and actually says this is a market on crack. he'll be here to back it all up. >> also it is said that individual investors are often last to come to the party. is this rally pulling more people into the world of stocks? we'll look at that. >> plus, christine lagarde is one of the most powerful women in the world and has a dire warning for the united states. >> the u.s. authorities, u.s. members of congress have to consider the leading role played by the u.s. economy in the world is at stake. >> up next do not miss the first on cnbc interview from davos
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why wait for the new models? sleep train's year end clearance is ending soon. superior service, best selection, lowest price, guaranteed. ♪ sleep train ♪ your ticket to a better night's sleep ♪ well the world is watching. that's what international monetary fund managing director christine lagarde says in a nutshell about how the u.s. addresses its debts problems right now. here is maria with lagarde in the first on cnbc interview. >> let me ask you about the united states. you know, we've been talking about this dysfunction in washington and so many executives come on the program and they say we have money on the balance sheet. we're ready to go. we want to hire. we want to put money to work and yet they don't because of the uncertainty. how much of an issue has this dysfunction been in terms of policy makers unable to come to
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compromise, stopping the progression of business? >> it's a big issue because it is a big economy and it's a big uncertainty. i believe, however, that up until now there has been the sort of underlying confidence that the u.s. at the 11th hour will cut a deal. that's why you haven't really seen in the spreads on the markets either a sign of great distress and concern. but confidence is something that is really fragile, can be eroded gradually, or broken down. i think if we are seeing anything at the moment it's a very slight erosion and risk of further erosion, which in the long term could possibly threaten this sort of role played by the u.s. markets by the u.s. currency, by the u.s. treasury bonds. i think it is a real issue, but
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the u.s. authorities, the u.s. members of congress have to consider the leading role played by the u.s. economy in the world is at stake. and too much uncertainty or uncertainty for too long will erode confidence. that's factor one. factor two, there is plenty of liquidity around. that's what the bankers i'm sure are telling you. that's what corporate leaders are telling you. and they want some yields. they want to invest and they cannot sit on cash forever. so they're going to look for higher yield. they're going to take bigger risks. and that can be good for some countries, good for some categories of products, good for some commodities. but it can be also quite dangerous and we certainly don't want to see huge movement of capital going in uncertain directions or on uncertain products. we don't want that to happen again. >> meanwhile, yesterday i spoke with eric cantor the house
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majority leader and we talked about congress extending the debt limit. he said basically we had to extend the debt limit because we don't want it to be hostage on the economy. we want to have time to think this out. my question to you is was that the right move? how worried are you about the 16.4 trillion dollars that the, in debt that the u.s. faces, and is it the right move to move this limit three months or are we just making things, kicking the can down the road making it worse taking on more debt and giving us more room to borrow? >> did he tell you what would happen in the three months? i think that's the trailer. if they take the advantage of those three months, to really sit down quietly, confidentially without too much focus on what is going on, to discuss the long-term program for debt reduction, the way to reduce deficit as the u.s. has, you know, already done in the last few years, how to deal with, you know, health care and welfare
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systems that are really the cause for a significant increase in the deficit, if they do that and in three months' time having discussed the budget in the meantime, they come up with a proposal, then that's great because, you know, things are negotiated under pressure sometimes at the 11th hour as we discussed earlier today. but if they take the time to really sit down rationally, sensibly, putting a little bit of their respective ideology on the side to really focus on what is good for the economy and what is going to be good for the rest of the world, that's great. but if it's only three months to kick the can down the road a little bit longer, a little bit further and then we'll see in three months' time what we discuss and how we deal with the debt ceiling, that's not especially helpful. that's what actually a lot of u.s. leaders complained about with the europeans about a year ago. they were saying oh, you know just pushing the can down the
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road yet again. well, sure. >> i guess the whole issue of do you provide stimulus to a weak and anemic story or do you cut back in a time that things are really not growing so adding austerity to an already weak story? >> what is needed is confidence. and you need to restore confidence in the way an economy is run. so things will vary depending on the strength of the currency, depending on the financing needs, the financing situation of the country and for some countries austerity, strong right from the start, is needed. when, you know, the situation of finance -- when the financing is under huge pressure. as has been the case with some european countries. in other situations, where there is a degree of confidence where
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markets know that the governments are serious about what they're doing, the pace doesn't have to be as, you know, abrupt, as hard as fast and the pace can be slower in those situations. >> what are the implications of the uk leaving the eu? david cameron said he is going to have a referendum on this. >> you know, from an economic perspective, we expect europe to be a strong region and a strong player in the global economy. from an economic perspective, you don't want uncertainty. so our dear hope is that as usual the europeans will have discussions, will have debate, will argue, will face obstacles and hurdles and come out of it stronger and that's very much my personal hope with the uk. >> so glad you're checking on the program. thank you so much. great to see you. christine lagarde. >> stick around because maria
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has much more coming from davos including interviews with microsoft founder bill gates and pay pal cofounder peter thiel with incredible things to say about twitter. all of it not exactly positive. that is an interview you do not want to miss coming up here on "closing bell." >> absolutely. okay. we've got more than a half hour to go before the closing bell at this stage the dow moving up by about 0.3%, 48 points there. but got lots more coming. >> meanwhile, don't look now but exxon mobil is reclaiming the title as the world's most valuable company from apple. which stock are you better off buying? we have that straight ahead and talking numbers. >> research in motion, rimm just days from releasing its highly anticipated blackberry 10 but will it live up to the hype? and of course all the expectations that are being built into the stock comeback as well. that's all coming up later on on "the closing bell."
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the tech sector out performed the s&p 500 since the benchmark hit an all time high back in 2007. john ford now takes a look at which tech stocks led the market back then and how they are performing now. a comparison isn't it, john? >> yeah, mandy. intel and hp were two of the best performing stocks in the dow back then from january to october, 2007. intel was up 28% for the year. hp up 27%.
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things have changed a bit. intel is down 19% over the five plus years. hp down 68%. what happened? well, the smart phone and the cloud. intel and hp both got profits when growing pc business intel from chips hp from low margin scale in pcs. the pc business isn't growing anymore. gardner reported it was down 8 and then 5% year over year in the third quarter. on the flip side of the trend the biggest gainers in the s&p i.t. index reads like a who's who of cloud mobile and services. sales force, apple, red hot, intu it, ibm, all near the top of the list. the question is whether we're seeing another shift with apple's recent tumble. are products moving from apple to hardware from android and google and amazon or will apple's higher end devices have more staying power? the answer will determine who is at the top of this list in 2018 and who is at the bottom, guys. back to you. >> the big gamble they face right now.
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thanks very much. forget that big money battle between icahn and ackman. we'll have more on that but an even bigger clash of the titans exxon mobil and apple nearly neck and neck right now as the most valuable company based on market capitalization. number of shares outstanding multiplied by the stock price. apple shares as you saw, john, hitting a new 52-week low. which stock is the better buy right now? exxon mobil or apple? we'll talk numbers on that on the technical side with ennis tanner with risk reversal.com and the fundamental side steve cortez the founder of vericruz. what do you think on the charts? >> apple has been laid to the wayside. in an otherwise strong market. if we pull up the two-year chart you can see that we're getting close to support levels that i think you can start to put on a trade again. so on the two-year chart you can see in 2011 the 425 area resistance and when it broke in 2012 the stock went on an
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unhealthy move that turned out to be unsustainable. now we're back to near that the 425 level that was resistance and i think will act as support going forward. apple is going to take some time to bottom but a great risk reward entry here. conversely if we look at exxon you look at the seven-year chart and you can see that actually exxon is near long-term resistance. the $95 area has been resistant over the last seven years several times and i think here is not a good entry point to get long exxon. >> steve? >> ennis, i agree on apple. i have been on this network i think one of the most consistent critics of apple. i frequently have been shorted in recent months but i am flipping to the other side right now and i bought apple. i've been suffering so far. the reason i did is based on sentiment. it was impossible to find an apple skeptic when apple was at 700 back in september but we now see the exact inverse situation. it is very hard to find anyone who could say anything good about apple.
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so i do think on this plunge for a trade the risk reward favors buying apple. i think in general when they're crying i am buying. there is a lot of crying in cupertino right now. i am actually long apple. >> what would do you with exxon here? >> on that score i disagree. i'm long both of these stocks. i don't think you have to choose. my answer is both. i like both of them. i don't know which one is the bigger market cap but i think they both do better from here. the main reason i like exxon mobil is you get a very solid global company at a very attractive valuation in terms of its pe. energy has traded well. halliburton earnings this morning were fantastic. oil services are going to do very well with crude oil in the 90s. >> final thoughts ennis? >> i just say apple is going to be a process. so i would give yourself a little room. >> all right. good discussion guys. very important topic there. we're waiting to see who when all is said and done is the most valued company in the world right now. it is between those two right now by far.
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coming up much more on the investors taking a bite out of apple stock. we'll hear from somebody who says shares are too cheap to pass up. he is like steve cortez in that regard. >> indeed he is. we're counting down with 30 minutes to go before the final trades are in for the week. in fact we're moving a little higher from where we last checked the dow. currently up by 56 points and in fact sitting at the best january so far since 1994. >> what were you doing -- well we'll talk about that later. the on air throwdown everyone is ta still talking about. bill ackman versus carl icahn. >> this is not an honest guy. this is not a guy who keeps his word. this is a guy who takes advantage of little people. >> the quintessential example that on wall street if you want a friend get a dog. >> we got more reaction to that clash and what is behind it coming up. plus let us know whether you're on team icahn or team ackman. who won the battle of the titans? tweet us at closing bell.
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don't forget you can see the whole battle right now on cnbc.com. >> and then later on, folks, maria's interview with bill gates. where you will hear a very interesting revelation about the kind of smart phone his daughters use. stick around. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 and with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime. tdd#: 1-800-345-2550 until i choose to focus on something else. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 open an account with a $50,000 deposit, tdd#: 1-800-345-2550 and get 6 months commission-free trades. tdd#: 1-800-345-2550 call 1-866-294-5412.
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the dow is moving higher. still at this hour up 53 points. we can see where we are relative to the all time highs on the dow when it closed on october 9th of 2007 at 14,164. it's all-time closing high at that level. the s&p closes positive today, it will be eight days in a row. that's the longest winning streak we've seen for the s&p going back to november of 2004. so with stocks roaring is the individual investor coming back to the market? that is what we're looking at today. >> we've got mitchell kaplan the former ceo of e-trade financial now the ceo of jefferson national and also ronald krucewski president and ceo of stifle financial. great to have you on the show. ron, to you first of all.
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my fear is when this kind of thing happens and people see the headlines, moms and pops see most of your highs nearing record highs they're like i want to get in on this too. then sometimes they get burned because they're coming in too late. is there any danger of that happening this time around? the market hasn't gone anywhere since 2007 as you said. the equity markets are adjusting to the bond markets. it is not too late to get in at all. if the market climbs a wall of worry when there is no more worry then you get out of the market. >> you don't think they're in yet. you feel like they're still very much in the bond market trying to huddle there away from risk and not in a big way moving into the stock market yet. is that what you're seay, ron? >> we've had about $350 billion of outflows out of equities in the last two weeks, the first significant inflows into
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equities that we have seen in years. if it's just starting it's not over. >> mitch, are they in yet or not? >> i don't think they're remotely in yet. my experience is over time they get very nervous around volatility. there are so many macro uncertainties going on in washington. and the investor usually sort of stays on the sidelines. i think you can see it when you look at trading volumes out there. >> would you say you don't think they're in yet, mitch, what do you think is going to bring them back in? is it going to be, unfortunately, reaching new record highs will bring them in which brings me back to my original question about whether that is the time it is too late? >> my perspective is sort of evolved over time. what i see is more and more investors are making the decision to need advice and guiding advice and work with advisers and so ultimately i think it is going to be the advisers who are starting to move back in as they look at what's happening and the opportunity over the marketplace and their goal is to try to really deliver long-term returns for their clients and do it in a way which they managed through this volatility. >> ron, there are plenty of people who feel like a bond market is in bubble territory
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anyway and that the bubble is set to burst and so that they lose money there. is that what forces them into the equity market as sort of a where else do i go kind of trade at that point? >> individual investors look at bonds that mature at par value. i don't know that you have the same reaction to declining bond values that you do to the equity market. but the bottom line is, equities are under valued relative to bonds. i don't -- 1.8% for ten years is losing money inflation adjusted. the fact of the matter is investors have been scared to get in the market because of europe, because of a fiscal cliff. those risks are behind us and if washington comes up with a good solution the equity markets should go significantly higher. >> we always find we can climb the world of worry and then miss out on the opportunities which brings me to my next question. where are the opportunities right now? as you say, if you want to have good returns on the long term. >> you know, ultimately i think
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equities make a lot of sense. i think there are a number of very well run funds in the alternative space where people are trying to figure out how they take advantage of the upside and not be as directly correlated to the market but at the end of the day i think what they're really dealing with is the fear of the individual investor. i think they don't want to make the same mistake that has been made historically and they're worried about that volatility and what it could mean to their returns. >> what do you think the first trade should be, ron, when the person leaves the bond market and goes to stocks? go to those dividend plays everybody loves in the stock market right now or something else? >> i think in an improving economy the financials provide value. energy provides value. any of the consumers you get away from the defensive names potentially and into the growth names. but across the board equities are under valued. so i would just say i would tell investors that if you're getting zero on your money funds you should be allocating more money
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to equities and you can pick your sector. >> all right. very good, gentlemen. thank you both. have a good weekend. >> thanks. sad that so many of those individual investors have been burned in the past and fear is holding them back. >> that is what happens. human nature in the market. >> absolutely. >> they're coming back slowly. here the dow is up 50 points. 13,877. still ontrack for the best performance by end of january since 1994. >> in the meantime the dow and s&p may be nearing their record highs but harry dent is not buying it. he has predicted the dow will plunge to 6,000 over the next two years. what he sees and apparently few others don't. harry dent is next. >> also investors are gearing up for another huge week of earnings next week. the results could move this market even higher or bring it to a screaming halt. we'll look at both sides coming up. #
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responsibility. what's your policy?
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♪ [ male announcer ] some day, your life will flash before your eyes. make it worth watching. introducing the 2013 lexus ls. an entirely new pursuit. . as equity markets continue to climb higher harry dent the author of the book "the great crash ahead has two words for those in the market. get out. >> why you ask? well, in his words this is an ever increasingly market on crack. that is a quote. he still says a big fall is on its way. but cnbc contributor ron insama
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could not disagree more. harry, let's start with you. we have to say you have been very bearish but also very wrong so far. you're sticking with your guns. why? >> well, i am. first of all we're not saying the stock market is going to go down now. we're saying the second half of this year. what we look at is kind of the 30,000-foot view. this is not a short-term banking crisis we had or like the tsunami that hit japan. this has been built up for decades. greatest boom in history, spent more money from '83 to 2007. something we calibrate and mourned a long time ago. they're done spending especially on homes and done borrowing. but most importantly, we accumulated more debt in the private and public sectors four times our gdp, more than twice what we did in the roaring '20s in the last great bubble before it burst. >> right. >> so this is a long-term structural problem. the real question should be, what does it take, one trillion
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after another trillion after another trillion and now the japanese have gone totally nuts. just to keep these -- this economy barely in a coma, barely growing. that shows it's a long-term problem. >> let's clarify here. you say you right now feel like the stock market is going to go higher but in the past you said 6,000 on the dow in the next couple years. are you still ontrack for that? >> yes. >> okay. >> i think we'll see new highs in most of the markets especially the dow. 14,000, the limit on the upside 1580. 1600 on the s&p. later this first half of this year. and then they crash to 6,000. i note the pattern. every bubble we've had in stocks has gone to slight new highs. look back over the last 15 years. and then every crash has gone to slight new lows. that is all we're saying. bubble burst bubble burst. that is the nature of the markets. >> ron insanna why do you think harry is wrong? >> where to start? the last time i was on with harry on november 8 he said it would be the european debt crisis and fiscal cliff that would start to bring the market
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down and take us to 6,000 over the next two years. harry, i watched your tape just before i came over. >> i didn't say the fiscal cliff. that is temporary. you don't get a 6,000 crash over a fiscal cliff, ron. i'm sorry. >> harry, it was in the tape i just watched. but anyway. >> then let's play it back. >> i asked them to. but apparently they don't have it. here's -- >> i said the dow is going to go to 6,000 over the fiscal cliff? >> you said we had a european sovereign debt problem, spain was likely to be the larger trigger. >> that i said oh, yes. >> the fiscal cliff would be one of the contributing factors. >> yeah. a contributing factor. short term. >> i mentioned both things. >> how about something real here? >> corporations with $1.7 trillion worth of cash. banks well capitalized as they've been in 15 years. >> good reason. >> for the market to continue going higher. price earnings ratios at very fairly valued at current levels. in fact maybe even a little under valued. the economy is growing. real estate is turning around. manufacturing is coming home. we're in an energy boom. most things are going right with the economy and will continue to do so and the markets are
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telling us that by going up and doing things in tandem without any glaring divergences that would warn us otherwise. >> let's do this. harry, ron is pointing to improving fundamentals for the u.s. economy right now especially at the corporate level. do you agree with that? >> we have improving fundamentals from 2002 to 2007. stocks bubbled up. yes, yes, yes. then we crashed. >> all right. but right now improving fundamentals you said? >> they always look good at the top of a market. fundamentals do not deteriorate. the markets start to crash ahead of the fundamentals. and again, i don't think they're going down yet. >> okay. i think the fundamentals are good right now. >> ron, harry says we're on an unsustainable debt accumulation phase right now. >> the budget deficit is coming down as a percentage of gdp and will continue to do so. we're likely to get a resolution on the budget. it won't be what we want, won't be simpson bowles. if you look at what happened with the banks in europe which repaid the european central bank more money than thought was possible in only a year on a three-year lending facility
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europe is actually although it is going slow healing itself. the u.s. is actually in very good shape. you take the government out of the equation in terms of the percentage of gdp and a very good economist said the private sector economy last year threw 3%. profits will continue to go higher. yes the markets do peak ahead of the economy but we're not seeing the types of divergences we saw in 2007 and 2008 that would lead anyone to worry about, one, the market or, two, the economy. >> harry, do you want to rebuff? >> yes. we're not seeing -- we started to see the divergences in mid 2012 but qe3 changed that. i agree with ron we are not seeing those divergences either. that is why i'm not saying it is going to happen now. i'll be looking for those divergences probably somewhere in the second quarter. we probably go up higher here for a while. we see another correction. it'll be on the last rally that you start to see the smart money selling and buying pressure go down and selling pressure go up. >> what would prompt that? >> we haven't seen that yet. >> if you see that the top is
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occurring at the second half of the year, what would prompt the smart money to start selling at that point? >> a capitalist. >> okay. i'll tell you one thing again. look at the stock charts. this is the clearest pattern i've ever seen. a megaphone pattern as i said before. each bubble the new high. if you draw a trend line through the 2000 top and the 2007 top into now you'll hit that later this year. it's 1600 on the s&p 500. if i'm a smart money person, technical trader, i'm going to say, i'm going to short here and the market is going to have to really push above that. >> it would be a technical prompt of the sell off not a fundamental one. >> the second thing you see, i think that can do it, we have massive stimulus. i mean the fed keeps upping the stimulus. qe3, bigger than qe2. japan just, i mean they're stimulating the equivalent of 3 or 4 trillion a year. given the size of their economy. if we keep seeing up and up stimulus and less and less response in the economy than
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people will lose -- to me a question ron said earlier 1.7 trillion in balance sheets on companies that is a sign something is wrong. why would companies not be investing free cash if they were so confident this recovery is sustained. >> the final word? >> i think the bank of japan by stimulating as much as it is doing means it has to buy treasury bonds, submit its currency lower. interest rates stay down. with or without the fed china is going to do the same thing. so is everybody else. i don't, there is nothing yet that tells me any time in the next one, two, or three years we'll have the types of trouble we've seen in the past. it's just not setting up the same. this economy is in much stronger shape than precrisis and not vulnerable in any way. >> it is in strong shape. it's had trillions and trillions of dollars of crack and it ness a coma. >> policy matters. >> how long do you do this, ron? >> as long as it takes. >> you have to do this for another decade. >> then we don't go into the depression. >> you end up in a coma forever like japan. look at japan's economy. >> let's agree to disagree on
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this one. >> 22 years later. >> you can continue the conversation. over a drink. it is friday night after all. okay. what are we? about ten minutes away from the closing bell. up by about 40 points on the dow. you know, we've actually been very, very -- doing very well. i think we're up what, 5.8 so far this january? >> yes. a good year so far. things getting pretty heated between two of wall street's most influential investors. >> number one, carl is free to make a tenlder offer for the company. you want to bid for the company go ahead and bid. >> you don't have to tell me what i'm free to do. >> okay. >> number one. >> yes. it's the thing you missed. it's true. it was pretty good. stick around. you don't want to miss the rest of the interview. everybody has been talking about it today. let us know whether you're on team icahn or ackman. who won? tweet us at cnbc closing bell. don't forget you can see the whole battle right now on cnbc.com. >> okay. also ahead do stay tuned. we've got maria's one-on-one
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interview with bill gates from davos. how involved is he with microsoft right now? maria will get to the bottom of that and lots more. do stay tuned to cnbc's "closing bell."ouncer ] what if the ne, isn't a thing at all? it's lots of things. all waking up. connecting to the global phenomenon we call the internet of everything. ♪ it's going to be amazing. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco. tomorrow starts here. [ construction sounds ] ♪ [ watch ticking ] [ engine revs ] come in. ♪ got the coffee. that was fast. we're outta here. ♪
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financials down sharply since the s&p hit its all time high back in 2007. but that sector is still one of the real leaders of the current rally. >> hey, bill. financials may have been leading the rally in the last year but compared to those '07 highs financials not just down sharply. the worst performing of any sector. the financial sector down 51% since that early october '07 day. even the rest of the market rebounded since then. consumer discretionary we should note fared the best which probably explains why with consumers spending money the best performers within the financials are credit cards. mastercard leading the pack up 219% since that high. visa, which went public after that date in march, 2008, is up 182%. the banks still on the bottom rungs beaten down following the financial crisis that brought them to the brink. citigroup one of the past year's best winners is still off 91% since then. bill and mandy, that's not even looking at the banks that didn't make it through the crisis.
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we still have a long way to go for the financials. >> indeed we do. thank you very much. thank you very much. >> we're back with the closing countdown with the dow and s&p continuing to move higher. >> also apple down about 12% this week. it's still falling but somebody here says anybody shying away from the stock is making a big mistake. is it a buy at this level or there is plor to come? the debate is coming your way next.
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